Manning v. Bd. of Tax Com'rs of R.I.

• Decision Date: 04 February 1925
• Docket Number: Nos. 642, 643.,s. 642, 643.
• Parties: MANNING et al. v. BOARD OF TAX COM'RS OF RHODE ISLAND. RHODE ISLAND HOSPITAL TRUST CO. et al. v. SAME.
• Court: Rhode Island Supreme Court

127 A. 865

MANNING et al.

v. BOARD OF TAX COM'RS OF RHODE ISLAND.

RHODE ISLAND HOSPITAL TRUST CO. et al.

v. SAME.

Nos. 642, 643.

Supreme Court of Rhode Island.

Feb. 4, 1925.

Case Certified from Superior Court, Providence and Bristol Counties.

Suits by Paul D. Manning, administrator c. t. a., and others, and by the Rhode Island Hospital Trust Company, executor, and others against the Board of Tax Commissioners of the State of Rhode Island for abatement of estate and succession taxes. On certification from superior court. Petition in first suit granted, and in second denied.

Tillinghast & Collins and James A. Tillinghast, all of Providence, for petitioners.

Herbert L. Carpenter, Atty. Gen., and Harold W. James, of Providence, for respondents.

SWEETLAND, C. J. The first of the above-entitled proceedings is a petition in equity, filed by the administrator, with the will annexed of George A. Hill, late of Douglas, in the commonwealth of Massachusetts, and the Rhode Island Hospital Trust Company as executor of the will of William W. Chapin, deceased, late of Providence, asking for the abatement of an inheritance tax paid under protest. The tax was assessed by the respondent board upon the estate of George A. Hill as an estate tax upon the right of the testator to transfer, by his will, certain real estate in Providence to William W. Chapin, late of Providence, who deceased after said testator. In assessing this tax the respondent board relied upon the provisions of section 1 of the Inheritance Tax Act of 1916, which became section 1, c. 39, General Laws 1923, which, after the death of the testator, George A. Hill, has been amended by chapter 426, Public Laws 1923.

The second of the above-entitled proceedings is a petition in equity, filed by the executor of the will of William W. Chapin and the administrator c. t. a. of the estate of George A. Hill for the abatement of an inheritance tax paid under protest. The tax was intended to be the complement of that which is the subject of the first of the above-entitled proceedings, and was a succession or legacy tax assessed upon the right to receive the devise of said real estate under the will of George A. Hill. In assessing this tax the respondent relied upon the provisions of section 5, par. 3 of the Inheritance Tax Act of 1916, which became section 5, par. 3, c. 39, General Laws 1923, which, since the death of George A. Hill, has been amended by chapters 423, 426, and 464, Public Laws 1923.

The petitioners are before us upon agreed statements of fact. From said statements the following facts appear:

The real estate which the respondent claims William W. Chapin received under the will of George A. Hill is situated on Washington street in Providence and was, at the time of her death, in 1889, the homestead estate of one Sarah C. Hill of Providence. Under the will of Mrs. Hill this real estate was included in the residuary estate which she gave in trust for the benefit of her son, George A. Hill, during his life. The will provided that the trust should terminate upon the death of George A. Hill, and upon his death the trust estate should pass to the child or children of George A. Hill then living. If he died without surviving child or children, then she gave her residuary estate to such persons as George A. Hill should by will direct and appoint. In default of any child surviving him or of any such appointment by him, she made various provisions for the disposition of the trust estate. Among them was the following, with reference to the real estate in question:

"To my nephew, William Waterman Chapin, my said homestead estate where I now reside to him and his heirs to his and their own use forever."

George A. Hill died February 17, 1922, never having married. He left a will which was duly probated in the county of Worcester in the commonwealth of Massachusetts, and which has been duly filed and recorded in the municipal court of Providence. In said will he provided as follows:

"Twelfth. I give and devise to my said cousin, William Waterman Chapin, of Providence, in the state of Rhode Island, my homestead estate on Washington street in said Providence where I formerly resided, to him and his heirs to their own use and behoof forever."

From other language contained in the will it is clear that the testator by this provision intended, with respect to said real estate, to exercise the power of appointment given to him in the will of his mother Sarah C. Hill.

In the consideration of these petitions the first question presented is as to the source from which William W. Chapin received the real estate in question. Was it by transfer under the will of Mrs. Hill, or by transfer under the will of her son, George A. Hill? In accordance with former decisions of this court Mr. Chapin, upon the death of Mrs. Hill, by reason of the provisions of her will, received a vested interest in said land, subject to be divested upon the death of her son leaving a child or children surviving, and further subject to be divested in the event that the son left no surviving children, but in his will exercised the power of appointment conferred by the will of his mother. Moore v. Dimond, 5 R. I. 121, at page 129; Grosvenor v. Bowen, 15 R. I. 549, 10 A. 589. Under somewhat analogous provisions of a will it was held in Kenyon, Petitioner, 17 R. I. 149, 20 A. 294, that a devise of a remainder, after an equitable life estate, was vested at the testator's death although the trustees were empowered to use the whole or any part of the trust estate during the life of and for the benefit of the equitable life tenant. Unon the death of Mr. Hill, neither of the contingencies named in the will of his mother arose, and the vested interest of Mr. Chapin in the land, which had been in him since the death of Mrs. Hill, remained undisturbed.

It is a recognized rule of the common law that a bequest which comes to a beneficiary through the exercise of a power of appointment, or by reason of a failure of its exercise, is a gift to the beneficiary from the creator and not from the donee of the power.

It does not appear to us that the provisions of the Inheritance Tax Law, which we shall consider later, were intended to vary this rule of the common law. We hold that, under the will of Mrs. Hill, the real estate vested in right in Mr. Chapin at the time of her death, and that later it vested in him in possession and enjoyment. The privilege of entering into possession under the latter vesting is also referable to the will of Mrs. Hill and was derived from her; but it did not come to Mr. Chapin until the death of the son, George A. Hill, and then through the conduct of the son in failing to appoint the remainder to a person other than Mr. Chapin.

The testamentary provision in the will of George A. Hill which purports to exercise the power of appointment did not have that effect. Mr. Hill had control over the remainder, in case he died childless, either by the exercise of his power to transfer the estate by testamentary provision, not to Mr. Chapin, but to some other person, or by refraining from its exercise. We find that in law he did the latter. Nevertheless, the succession passed through the conduct of Mr. Hill effective at his death.

In the agreed statement of facts it appears "that after the death of George A. Hill the said William W. Chapin, during his life, expressly declared that he inherited and received the said homestead estate from his aunt, Sarah C. Hill, and not from his cousin, George A. Hill." Such declaration by Mr. Chapin appears to us to be of no moment. He might have refused to receive the gift altogether. But as he accepted it, he must be held to have taken it from the source from which in law the gift came. We hold that the gift in question was received from Mrs. Hill through the conduct of her son because of the legal effect of the provisions of the wills of Mrs. Hill and her son, and not by reason of an election on the part of Mr. Chapin. Neither could Mr. Chapin, by an election, vary the proper application of the provisions of the Inheritance Tax Laws.

The respondent contends that although we may find that there was the transfer of a vested interest to Mr. Chapin under the will of Mrs. Hill, nevertheless, for the purpose of taxation under the Inheritance Tax Act of 1916, it should be deemed a transfer from George A. Hill. This claim is urged on the strength of the following provisions of said act, now section 5, par. 3, c. 39, General Laws 1923 (amended since the death of George A. Hill by chapters 423, 426, and 464, Public Laws 1923):

"(3) Whenever any person shall exercise a power of appointment, derived from any disposition of property made whether before or after the enactment of this chapter, such appointment when made shall be deemed a transfer taxable under the provisions of this chapter in the same manner as though the property to which such appointment relates belonged absolutely to the donee of such power and had been bequeathed or devised by such donee by will; and whenever any person possessing such a power of appointment so derived shall omit or fail to exercise the same within the time provided therefor in whole or in part, a transfer taxable under the provisions of this chapter shall be deemed to take place to the extent of such omission or failure, in the same manner as though the person thereby becoming entitled to the possession or enjoyment of the property to which such power related had succeeded thereto by a will of the donee of the power failing to exercise such power, and shall take effect at the time of such omission or failure."

The two distinct provisions contained in the paragraph we shall hereafter in this opinion refer to respectively as the first and the latter provision of paragraph 3. From the language of paragraph 3 just quoted we hold that it was the intent of the General Assembly, in the circumstances appearing in the agreed statement of...